Spending on Cloud Infrastructure up 14.9% in first-quarter

Spending on compute and storage infrastructure products for cloud deployments experienced a significant increase of 14.9 percent in the first quarter of 2023, reaching a total of $21.5 billion.
Cloud Infrastructure Spending forecastIn contrast, the non-cloud segment saw a slight decline of 0.9 percent, amounting to $13.8 billion during the same period, according to a report by IDC.

Though the demand for Cloud Infrastructure units decreased by 11.4 percent, the average selling prices (ASPs) witnessed a notable growth of 29.7 percent. This rise can be attributed to inflationary pressure and the higher concentration of GPU-accelerated systems being adopted by cloud service providers.

In the first quarter, spending on shared cloud infrastructure amounted to $15.7 billion, indicating a substantial increase of 22.5 percent compared to the previous year. It is projected that shared cloud infrastructure will surpass non-cloud infrastructure in terms of spending in 2023.

On the other hand, the dedicated cloud infrastructure segment experienced a decline of 1.5 percent, totaling $5.8 billion in 1Q23. Out of the overall dedicated cloud infrastructure, 44.5 percent was deployed on customer premises during this period.

Looking ahead, IDC forecasts a 7.3 percent growth in cloud infrastructure spending for the year 2023, amounting to $96.4 billion. However, non-cloud infrastructure is expected to decline by 6.3 percent, reaching $60.4 billion. Shared cloud infrastructure is anticipated to grow by 8.4 percent year over year, totaling $68 billion for the entire year, while spending on dedicated cloud infrastructure is expected to increase by 4.8 percent, reaching $28.4 billion.

These growth predictions take into account various factors, including the expectation of significant macroeconomic headwinds and a decrease in demand. Nevertheless, the cloud market is expected to remain positive due to the drive for modernization, focus on operational expenditure, and continued growth in demand for digital consumer services. Conversely, non-cloud contracts are likely to decline as enterprise customers shift their focus towards capital preservation.

In the first quarter of 2023, service providers collectively spent $21.5 billion on compute and storage infrastructure, marking a 14.6 percent increase compared to the previous year. This spending accounted for 60.8 percent of the total market. On the other hand, non-service providers, including enterprises and government entities, witnessed a slight decrease of 0.5 percent in their spending. IDC expects compute and storage spending by service providers to reach $94.5 billion in 2023, representing a year-over-year growth rate of 5.6 percent.

IDC’s long-term predictions indicate that spending on cloud infrastructure will continue to rise, with a projected compound annual growth rate (CAGR) of 11.2 percent over the forecast period of 2022-2027. By 2027, cloud infrastructure spending is expected to reach $153.0 billion, accounting for 69.0 percent of the total compute and storage infrastructure expenditure.

Shared cloud infrastructure is forecasted to make up 72.0 percent of the total cloud spending, with a CAGR of 11.9 percent, reaching $110.1 billion by 2027. Meanwhile, spending on dedicated cloud infrastructure is predicted to grow at a CAGR of 9.6 percent, reaching $42.9 billion. Spending on non-cloud infrastructure is expected to grow at a slower rate, with a CAGR of 1.3 percent, reaching $68.6 billion in 2027.

Furthermore, spending by service providers on compute and storage infrastructure is projected to experience a CAGR of 10.6 percent, reaching $148.2 billion in 2027

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